In a year where nearly every activity has gone digital — from work, to fitness classes, to happy hour — it is no surprise that digital and mobile banking has seen a spike in usage and adoption. Since the start of 2020, in-person visits to banks and other financial institutions declined by 33%. From January to September, the number of adults who reported banking with a mobile app in the last 30 days increased by about 8%, equal to half the growth that the mobile and online banking industry had seen since 2018 — in just nine months.
Whether it is due to changes in consumer banking behavior or not, 2020 brought on a renaissance of FinTech competition, this time in the credit card world. To stay relevant among young consumers, three new high-tech, digital-first credit cards were launched. Here is what we know about this year's shiny new credit cards.
cred.ai
Cred.ai is a startup that prides itself on being both a banking infrastructure and an everyday card geared towards newcomers to building credit and Millennials with distrust in the financial system. In early August, the startup announced the launch of its AI-powered credit card, issued by Wilmington Savings Fund Society.
The card has no rewards — no cash back, no points, no miles. And no pre-determined credit limit, no payments, no interest, and no fees. That is, if the user agrees to let the company's AI manage all their finances. Artificial intelligence will automatically pay a cardholder's bills, determine a conservative spending limit based on upcoming expenses and paychecks, reject transactions if a cardholder tries to spend beyond their means, and build credit — all while avoiding unnecessary fees. If the AI miscalculates and lets a user overspend, it will cover the costs.
The card seems like a fit for a young, financially new consumer ready to start their credit journey. But even the startup's own site tells potential cardholders they can "spend like you're using a debit card." In practice, the card is built like a flashy debit with the added benefit of building credit and a mobile app with fancier names for features that exist on most other digital-first cards — like "Stealth Card," which gives users a virtual card number for risky transactions and subscriptions.
Overall, cred.ai has some unique features, and images of its coming-soon mobile application will likely garner the attention of credit newcomers and Millennials eager to try something new. The card is backed by John Legend and NBA star Andre Iguodala, and is currently offering beta access only.
X1 Signature Visa
With claims of being the "smartest credit card ever made," the creators of the X1 card state that this new launch — issued by Silicon Valley Bank — is "designed for a new generation of cardholders." Features include no hard pull of an applicant's credit (with the credit limit determined by current and future income), credit utilization that grows automatically with the cardholder's income, and one-time-use virtual cards with easy cancellation of recurring payments.
The card and accompanying mobile app were developed by ThriveCash, a company that offers low-rate loans to students and recent grads. The company has raised over $10 million in funding from PayPal, Affirm founder Max Levchin, former Twitter COO Adam Bain, and others.
X1 has a waitlist of over 200,000 people and will not start sending cards until Winter 2020. Cardholders will earn points on a tiered system: 2x points per dollar on every purchase, 3x after $15,000 in annual spend, and 4x for every approved referral. Points can be redeemed at a list of partner brands including Airbnb, Apple, Glossier, Nike, Peloton, and Warby Parker.
Competitively, the X1 Card closely compares to other digital-first cards like the Petal Visa and PayPal's Cashback Mastercard. On rewards, it is positioned to compete with Citi's Double Cash card and the Chase Freedom Flex. If the mobile experience delivers what is promised, it could attract attention from Apple Card users as well.
Venmo Credit Card
PayPal-owned Venmo announced the release of its first credit card on October 5, backed by Synchrony Bank. Considering the app's existing Millennial and Gen Z customer base, the card carries features that appeal to these groups: a mobile-first experience for tracking purchases and rewards, contactless QR payments at 8,000+ CVS stores, virtual card numbers, and the ability to split purchases with friends directly in the app.
The Venmo Credit Card offers cash back on an intelligent tiered system that changes month-to-month based on a user's actual spending habits across eight categories: Grocery, Bills & Utilities, Health & Beauty, Gas, Entertainment, Dining & Nightlife, Transportation, and Travel. Members earn 3% cash back in their top spending category, 2% in their second-highest, and 1% on everything else.
Earned cash back is deposited into the user's Venmo account balance and can be used toward their credit card bill, at point-of-sale, to pay a friend, or transferred to a linked bank account. The physical card comes in one of five bright colors and features the cardholder's unique QR code on the front.
Comparatively, the Venmo Credit Card most closely resembles the Bank of America Cash Rewards Visa, which also allows users to select their top cash back category month-to-month. On mobile features alone, it promises a highly trackable spending reporting system with some resemblance to Apple Card's color-coded categories and per-transaction rewards activity.
The Bigger Picture
All three cards share a common thread: they are built for a generation that expects banking to feel like software. The real differentiator for each will be execution — whether the mobile experiences deliver on their promises and whether the underlying economics can support the features being offered. That is a question the market will answer over the next few years.